Tax Flash

The New York State MCTMT Tax Found Constitutional: One More Challenge Still Possible

On June 26, 2013, the Appellate Division of the Supreme Court of the State of New York reversed an August 22, 2012 decision finding the New York MTA Payroll Tax (MTA MCTMT) to have been unconstitutionally enacted.

The MTA MCTMT Tax is imposed on certain employers, self-employed individuals andpartners in a partnership conducting business within the Metropolitan Commuter TransportationDistrict which includes the boroughs of New York City, the counties of Nassau, Rockland,Suffolk, Orange, Putnam, Dutchess and Westchester. The highest effective rate is .34% of netearnings for self-employed individuals, partners, and employer's payroll expense for coveredemployees.

Edward Mangano, Nassau County Executive, and others brought suit and originally prevailed inthe lower court, which found in 2012, that the enactment of the statute was unconstitutional. TheAppellate Division, in a very brief opinion, reviewed the basis for the enactment of the statuteand found that because there was a direct benefit for mass transit users and to the regional andstate economies, a substantial State concern was addressed. As a result, the statute was notunconstitutionally passed and was within the legislature's authority to impose.

Subsequent to the 2012 ruling, the State issued procedures for taxpayers to file electronicprotective claims to insure they could qualify for refunds if the tax was ultimately foundunconstitutional. At that time they recommended taxpayers continue to pay the tax and file allrequired forms. Now that New York State has prevailed in the Appellate Division, it remains tobe seen what actions the original Plaintiffs will take. Will they appeal the Appellate Divisionruling to the highest New York Court, the Court of Appeals, or otherwise seek corrective actionwithin the New York State Legislature?

At this time, the MTA MCTMT Tax is back and remains constitutional. Taxpayers mustcontinue to file and pay until there are other decisions from the Courts or the New York Legislature.

Late Thursday June 27, Nassau County advised it will indeed challenge the decision by appeal. Stay Tuned!

Marcum LLP will continue to keep you apprised of all developments. If you have any questionsor need further assistance, please contact your dedicated Marcum LLP SALT professional.

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President Donald Trump pledged that his tax law would kill off breaks and complex loopholes for the wealthy. Instead, the overhaul has ushered in a new generation of maneuvers that taxpayers can exploit before Dec. 31 to minimize next year's bills.

The TCJA, signed into law in December 2017, provided sweeping changes affecting almost all businesses and individual taxpayers. One such change related to limitations on businesses deducting transportation fringe benefits related to employee transportation unless the employee recognizes income related to the fringe.

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